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Month: June 2016

Market Matters Morning Report Thursday 16th June 2016

by james Carter

Looking for opportunities in 5 stocks that BREXIT fears are hitting Slowly next week’s BREXIT vote approaches with even Janet Yellen saying the Fed considered the UK’s pending vote when not raising interest rates this morning. However, we believe with the US economic data disappointing over recent times the Fed is now unlikely to be in a position to raise interest rates twice in 2016, compared to the anticipated four increases only last December. In fact, the market is now pricing the next interest rate hike in 2017 – not 2016.

Market Matters Afternoon Report Thursday 16th June 2016

by james Carter

Market Matters Morning Report Wednesday 15th June 2016

by james Carter

We MUST Remain Focused During Heightened Volatility What a difference a few days makes, only last Thursday we pointed out that US stocks had moved less than 0.5% for 9 consecutive days, but warned of a potentially large move ahead due to all the geopolitical risks on the horizon. This concern has played out in dramatic fashion as the BREXIT vote appears to be no longer a foregone conclusion – hence, reaffirming our logic in holding around 36% in cash. Bookmakers, who are historically far more reliable than polls, have increased the possibility of a UK exit from the EU from 15% to 38% – the “Remain” vote is still ahead, but the risks of an exit have increased. The VIX (Fear Index) Weekly Chart With volatility increasing in most financial markets, today’s report is focusing on a few different specific areas as we keep our finger on the pulse during these exciting times. BREXIT There looks to be no doubt that this will be the focal point for markets over the next 9 days. Last night, UK stocks fell another 2% making it a 6.3% reversal over the last 2 weeks. The good news for equity markets is we now have the potential for bad news built into stock prices to a certain degree. A buy signal will be generated for the FTSE on a break back over 6075 – even before the vote.
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Market Matters Afternoon Report Wednesday 15th June 2016

by james Carter

Market Matters Morning Report Tuesday 14th June 2016

by james Carter

BREXIT is finally being taken seriously With the polls sitting at 50-50, it was amazing last week that stock markets were ignoring the possibility of Britain leaving the EU and the contagion risks that would bring into play. This week, things have changed with a bang as is clearly illustrated by the VIX / Fear Index below, which has rallied 65% in only 5 trading days, with the vote in 9 days’ time looming. Markets often go through periods where they are dominated by one topic and BREXIT looks like taking the mantle until the 23rd – remember US rate increases, Donald Trump, Greece, China and even the Scottish referendum etc. As we are sitting on over 35% cash, this volatility obviously makes us lick our lips, in anticipation of opportunities / bargains that may present themselves in June. The VIX (Fear Index) Weekly Chart Firstly, let’s briefly consider how BREXIT is unfolding and our interpretation of the likely outcome and of course, potential risks to markets. If Britain leaves the EU, the exact economic damage is impossible to predict, but it will be substantial and may take years to unravel. This enormous economic risk is the backbone of the “Stay” party’s campaign and one that is definitely scarring many voters. Conversely, immigration is the driving force of the “Leave” party and the recent atrocities of Orlando only reinforce the locals’ questions around the UK’s current policy stance. A quote in today’s Guardian reflects how many older Brits are thinking: “Immigration is out of control, the country is a mess and Brussels and the Germans are telling us what to do even though we won two world wars”. Last night, the British Pound gyrated between losses of 1% and gains of 0.
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Market Matters Afternoon Report Tuesday 14th June 2016

by james Carter

Market Matters Afternoon Report Friday 10th June 2016

by james Carter

Market Matters Morning Report Thursday 9th June 2016

by james Carter

Three markets we are currently watching very closely On the surface, markets feel very quiet with US stocks only 0.8%, below their all-time high and the S&P500 noticeably moving less than 0.5% for 9 consecutive days. The ASX200 remains around the 5400 area, where it has treaded water for the last 5 weeks and it currently feels like the end of financial year (EOFY) may become a non-event for our local stocks. With the BREXIT vote looming in 2 weeks and the market keen to see whether last week’s poor US unemployment data was a once off, it’s easy to predict a few more weeks of relative calm for stock markets. However its often during these very periods of market consolidation / relative inactivity that large moves commence, just after complacency sets in and stocks move earlier than expected in anticipation of future good or bad news. We are watching three markets closely at present that may determine our next investment decisions. We are currently holding ~36% in cash, we regard this large holding as comparatively aggressive to when we went 97% fully invested in stocks near the lows of 2016, but we are prepared to go higher into cash if circumstances dictate. ASX200 Weekly Chart

Market Matters Afternoon Report Thursday 9th June 2016

by james Carter

Market Matters Morning Report Wednesday 8th June 2016

by james Carter

Why haven’t we bought insurance stocks this week? We are currently sitting on relatively high levels of cash, looking for opportunities as we are bullish stocks for the months ahead. Hence with insurance stocks being hit this week, due to the awful east coast storms, subscribers have understandably been asking why we have not taken the plunge into the sector. The decision to date has been a combination of factors, which hopefully this morning’s report will shed some light on. Firstly, when we look at the insurance sector as a whole, technically we can see a further 10-15% upside, but this is not the clearest chart pattern around at present – we will look at our preferred two stocks in the sector later. Storms / accidents are part of doing business for insurance companies and if we are headed for extreme weather changes in years to come, premiums will simply rise. However, as with resource companies not being seen as Market Matters’ core portfolio holdings, as they cannot determine their own profitability year on year, the same could be said for insurance companies. ASX200 Insurance Index Monthly Chart Technically QBE looks good risk / reward buying under $12, as stops can be run below $11.50. On a macro level, QBE will benefit from rising US interest rates and a lower $A, as it holds funds in the US, and invests their insurance float largely in bonds however it must be cautioned that the market’s opinion on these two variables changes regularly, and is driven largely by policy settings and rhetoric, which as we know, will likely be the source of volatility over the coming months and even years. The other important factor for QBE is the negative trends in Commercial Insurance premiums globally, which is clearly a headwind for earnings. QBE Insurance (QBE) Monthly Chart

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